Simple(r) – A Review

This review has been written by Kayleigh van Oorschot of theNetherlands School of Public Administration. Kayleigh is on our Project Steering Committee and is also a co-author of the excellent report ‘Choice Architecture’

Cass Sunstein’s work explains how we can ‘save money and time, improve health, and lengthen lives’ by organizing simpler government. Sunstein’s work fits a larger trend: man is not fully rational and we better start creating policy that matches it. The behaviorist revolution has been trending since Kahneman received the Nobel Prize in Economic Sciences, in 2002. Ever since the academic disciplines of behaviorism and public administration have grown closer, e.g., Changing Behaviours, On the Rise of the Psychological State (Jones, Pykett, and Whitehead, 2013), The Behavioural Foundations of Public Policy (Shafir, 2013). Sunstein already played a large role in this development with his work Nudge, Improving decisions about health, wealth and happiness, which he co-authored with Richard Thaler. They introduced the terms libertarian paternalism and nudge, as a policy tool.

From 2010-2013 Sunstein was administrator of the Office of Information and Regulatory Affairs, ‘the cockpit of the regulatory state’. He attempted to separate his academic work from his public administrative work. The first article in which Sunstein explicitly mentions OIRA was published 4 months after he left office. And it is not until now that Simple(r) is published that ‘Sunstein pulls back the curtain to show what was done to show what was done, why Americans are better of as a result, and what the future has in store.’ Needless to say, this was a highly anticipated book.

The introduction reads: ‘the OIRA administrator is often described as the nation’s regulatory czar’. But, regulatory czar was a nickname for Sunstein, not for any of the past administrators. This may seem like minor detail, but is quite relevant as we find in chapter one. Numerous Senators were quite unhappy when Obama nominated Sunstein as administrator. Progressives claimed that he ‘would be an obstacle to necessary safeguards for the public’ while conservatives feared he would allow too much regulation. The vetting process took over four months, after which the actual election took another 5 months. In this period, Sunstein received hate mail, death threats, and was called the most evil and most dangerous man of America. Even so, mention is made throughout the entire book that regulatory moneyball, Sunstein’s ‘method’, is a ‘not part of a partisan agenda’. Even though he states that ‘nudging transcends the political debate’, its underlying value libertarian paternalism, has been rejected openly by both sides of the political spectrum. This might explain why Sunstein nearly frantically explains how regulatory moneyball defines what ‘government can and should accomplish’.

Regulatory moneyball refers to the way Billy Beane (former GM of Oakland Athletics) recruited his baseball team: using sabermatics and thus rejecting rationale of baseball (‘he has a great arm’, ‘he has great form’). This way of recruiting came to be known as Moneyball. The rest of the book focuses on practical examples of this regulatory moneyball. In chapter three Sunstein summarizes his former work on limited rationality. He explains how inertia influences our daily lives, as do default rules, clarity in options, framing, social pressure, overconfidence, and finally how governments should be aware of these ‘flaws’ in our rational thinking: policy should keep them in mind. The three concepts of regulatory moneyball are discussed in the second half of the book: Cost-benefit analysis, choice architecture, and nudge.

First of all cost-benefit analysis; Sunstein claims this should form the basis of the acceptance or rejection of most regulatory measures and policy. Cost-benefit analysis assures a cognitive check of our intuitive systems, assures the economically most viable option, and is therefore vital to policy making and regulation. In the book Nudge, it is explained that man is not driven by economics, man is no ‘Econ’. Instead, man is driven by many motivations that greatly exceed economics, he is ‘Human’. Why then, should we strive for economically optimal choices? Why continue to focus on economics if we acknowledge that individuals are driven by far more? Secondly, there is the problem of deriving the exact costs and benefits of things that cannot be economically measured. Sunstein explains that ‘some things aren’t quantifiable’ and that in those situations ‘the public should be made aware of that’. The problem is that there are many non-quantifiable elements of society: health, age, human dignity, education, et cetera. Sunstein explains that ‘there is no conflict between emphasizing the importance of quantification and recognizing that some things can’t be quantified’. The question is, what remains to be quantified?

The second concept of regulatory moneyball is choice architecture. A clear break is made with Sunstein’s former work, where choice architecture is portrayed as the foundation of nudge. Choice architecture is based on the idea that ‘rule writers should understand how their work is understood’. The beauty is that all policy and regulation has a choice architecture, and depending on the required outcome, the architecture should be different. Many opponents of nudge claim that adapting the environment in which a decision is made is, but manipulation of some level is inherent to creating a decision-making environment. What follows is the description of successful examples of adapted choice architecture and their impact on policy and regulation. Examples are the introduction of the USDA food plate (infograph on healthy eating and nutrition) and adaptations of the fuel economy label – showing the most important information more prominently.

The third and final element of regulatory moneyball is nudge. A nudge is an ‘approach that influences decisions while preserving freedom of choice’. An example of a nudge is adapting the default option, which is ‘sticky’. When you look at percentages of consents for organ donation it becomes clear the default option is decisive: in Germany the default is not donating and the consent rate is 12%, in Austria the default is donating, and the consent rate is over 99%. In both situations individuals have just as much freedom to deviate from the default option, yet people tend to do nothing and accept the status quo: they stick with the default. Some might call this paternalistic. Sunstein argues that liberty is preserved by giving people the option to ‘opt out’: libertarian paternalism. The problem with this term is that Sunstein also claims that people cannot be blamed for their inertia and limited rationality, both are predictable and regulatory moneyball should help people make better decisions. If you know people will stick with the default, changing the default option is not as non-committal as presented. If you are aware of the individuals’ limitations, and you tap into those flaws in order to make those individuals act in a certain way, it is too easy to say ‘people can still do the opposite’. Just because paternalism is linked with libertarian does not mean it is no longer paternalistic.

The problems with Sunstein’s work, the focus on economics and the larger role of paternalism than Sunstein originally implies, do not weigh up to the benefits of simpler government: more cost-efficiency, more effective policy and regulation, clarity for citizens, et cetera. Simpler government is no panacea for all policy and regulatory issues. But, combine simplicity and transparency and you probably are looking at the future of government.